Accountants must take COVID-19 change as an opportunity rather as challenge
Govt needs to come forward in a big way to rescue manufacturing and business sectors
There is much room for bringing improvement in Pakistan audit quality
Interview with Mr. Zia ul Mustafa — President, ICMA Pakistan
PAGE: Tell me something about yourself and ICMA Pakistan, please?
Zia ul Mustafa: Currently, I am serving as the President of the Institute of Cost and Management Accountants of Pakistan (ICMA Pakistan) for a three-year term i.e. 2018-2020. This is my second term as the President as earlier during the period 2012-2014, I also assumed the responsibility of the President of ICMA Pakistan.
I am also currently serving as the President of the South Asian Federation of Accountants (SAFA), which is a regional forum representing over 3,75,000 accountants having membership of the national chartered accountancy and cost and management accountancy institutions in the South Asian countries namely Pakistan, Bangladesh, India, Maldives, Nepal, Sri Lanka and Afghanistan.
As far as ICMA Pakistan is concerned, it is one of the premier professional institutes of Accountants, established in 1951 with the name and title of Pakistan Institute of Industrial Accountants (PIIA). The institute received its charter under the Cost and Management (CMA) Act, 1966 of the Parliament. Later, it was renamed as the Institute of Cost and Management Accountants of Pakistan. Under the CMA Act, 1966, ICMA Pakistan has been entrusted with the responsibility to provide education, examine competencies and confer internationally recognized post-graduate professional certifications of Associate Cost and Management Accountant (ACMA) and Fellow Cost and Management Accountant (FCMA).
ICMA Pakistan is the founding member of the International Federation of Accountants (IFAC) since 1977; Confederation of Asia and Pacific Accountants (CAPA) since 1980; and South Asia Federation of Accountants (SAFA) since 1984. ICMA Pakistan is also the only participant of the International Integrated Reporting Council in Pakistan.
The Institute has over 7,000 members, out of which more than 1,000 members are serving abroad. These members are serving at high-profile positions such as CEOs, CFOs, COOs, CIAs, Company Secretaries, Financial Analysts, Public Practitioners, Management Consultants, etc. hence making significant contributions towards business growth and economic development. Over the years, the Management Accountants produced by the Institute have met the requirements of industry and business as they are trained to turn knowledge into value addition.
PAGE: What measures are needed for the development of auditing profession in Pakistan?
Zia ul Mustafa: Audit quality is an important concept in both the public and private sectors and it is a key to consumer and investors’ trust and confidence in our market. The global focus is moving towards gauging the audit quality indicators which, interalia, covers, the time spent by senior audit team members; their years of audit experience and industry specialization, independence, and compliance with regulatory requirements and external inspection results. I think that there is much room for bringing improvement in the audit quality in Pakistan in accordance with international standards.
With rapid technological advancement and the advent of sophisticated accounting systems, the audit professionals in Pakistan must sharpen their skills to become experts in applying audit software in order to ensure better and more pervasive results in audit. They must keep pace with modern requirements and adopt ‘big techniques and analytics’ to carry out the auditing process in an efficient way. It is a fact that the traditional methods of auditing are not only time and energy consuming but also are prone to making mistakes. The synchronization of big data analysis and audit can lead to better evaluation of the financial matters of organizations.
The Office of the Auditor General Pakistan (AGP) has taken initiatives to automate their accounts and entire audit process and they further intend to develop a core team of IT Auditors to perform public sector audits. With the setting up of China-Pakistan Economic Corridor (CPEC) projects in Pakistan, there is a need for the government auditors to update their skills and knowledge about other special areas such as climate change, UN’s Sustainable Development Goals, energy, and water usage, along with infrastructure. For this purpose, the AGP office must interact with the professional bodies and international donors to arrange training programs for its officers.
ICMA Pakistan has been and shall continue to extend its professional support to the AGP office in its capacity building by providing training opportunities on IPSAS as well as auditing and financial management.
There is also a need for introducing a ‘Professional Cadre’ in Pakistan Accounts and Audit Services (PA&AS) to provide a direct route to the professional accountants to serve and prove their mettle in the PSCs and other autonomous organizations. At present, there are two generalized employment routes in PA&AS namely; Inter-Departmental Cadre (IDC) Route and Departmental Cadre (DC) Route. Under IDC Route, direct recruitment is made on Grade-17, which ends at the post of Auditor General or up to Grade-22 according to the length of service; whereas under DC Route, the entry of professional accountants, including CMAs and CAs, is on the post of ‘Junior Auditor’ with maximum career progression up to the post of Accounts or Audit Officer (BS-18) and that too at a very senior age, almost close to retirement. Furthermore, the appointments on Grade-17 and below through DC Route are made with relevant qualification background of finance and accounts; whereas under IDC Route the appointments made are without any consideration of relevant qualification due to which other generalized resources such as BA, Masters in Political Science, Journalism, Biology, etc. are hired for ‘specialized jobs’ of accounting and auditing which tantamount to encroaching upon the right of certified Accountants like CMAs, CAs or other finance professionals.
Hence, it is recommended by ICMA Pakistan that professional accountants should be inducted in the mainstream by creating a ‘Professional Cadre’ rather than to hire them through civil service. For this purpose, the quota should be reserved for professional accountants qualified from ICMA Pakistan and CA Pakistan for induction and promotion. This development will help to improve the quality of auditing and accounting functions of PA&AS so that they can serve the nation most appropriately and professionally.
PAGE: What are your suggestions for improving Public Sector Governance in Pakistan?
Zia ul Mustafa: Good governance is often considered essential for a country’s economic development. Today, governing Public Sector Companies (PSCs) have become quite challenging for governments around the globe. Many countries like China, Malaysia, Singapore, New Zealand, and France have introduced reforms to improve governance of PSCs. In Pakistan, few reforms initiatives have been taken to make the PSCs respond to new challenges; however, there are still opportunities for improvement in reforming the public sector governance in the country.
ICMA Pakistan, being a professional accounting body of international repute, has always played a proactive role in advising the government and regulating agencies on professional, financial, and economic policy matters. In addition to the submission of concrete recommendations, ICMA Pakistan also makes it a point to establish direct interaction with key government officials to convey its viewpoint and suggest ‘way forward’ on different financial and economic challenges as well as on improving public governance and productivity. To provide technical support to the government by identifying real challenges in governance and productivity of PSCs and to suggest the way forward by improving the professional competence, procedures, and legislation, ICMA Pakistan organized technical sessions in major cities of Pakistan, which were attended by over 250 CEOs, CFOs, Company Secretaries, CIAs and HODs of PSCs. The participants suggested reforms for bringing improvement in the functioning of PSCs including the empowerment of the Boards of such organizations.
Based on the outcome of the technical sessions, ICMA Pakistan’s delegation had productive meetings at a high level during which recommendations on corporate sector governance reforms were presented and submitted, especially for amending and elaborating the Public Sector Companies (Corporate Governance) Rules, 2013. I would like to highlight some of these recommendations here:
1) The procedure for appointment of members on PSC Boards should be clearly defined.
2) Appointments on PSC Boards should be based on skill-sets of nominees.
3) Mandatory formation of Board of Management and its Committees in PSCs.
4) Definition required as to who will take charge of CEO in case this position is vacant in PSCs.
5) Hiring of the CEO should be made through succession planning.
6) PSC Boards should be empowered to approve the Budget and Service Rules.
7) Board Audit Committees should be empowered to hear and take actions on Audit Observations.
8) PPRA Rules should be improved for clarity purposes.
9) PSC Boards should be empowered to frame HR Policy.
10) Tariff setting should be aligned with the Cost Audit.
11) Financial Reporting system should be made applicable in Government Departments.
12) Creating an e-Portal for Financial Reporting of Public Sector Companies.
13) There should be only one audit of PSCs instead of multiple audits by AGP and Audit Firms.
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ICMA Pakistan is optimistic that the government would consider these suggestions on merit to improve the public sector governance in Pakistan. The government must take all the professionals accounting bodies as well as the executors on board to frame new policies to bring reforms in the public sector and create a feel-good factor in the society to gain public trust.
It is worth mentioning here that ICMA Pakistan has recently signed an MoU with the Department of Auditor General of Pakistan through its Pakistan Audit & Accounts Academy (PAAA) with the objective to mutually explore opportunities to strengthen public sector governance and productivity; promote education and training in auditing and accounting areas to future improve the standards of public sector auditing and accounting functions. Under the MoU, both sides will jointly work on capacity building and arranging specialized training on IAS/IFRS, ISSAI stages, and SECP Code of Corporate Governance 2013 for Public Sector Companies. Moreover, under this MoU, a certification program titled ‘Public Sector Auditing/Governance’ will be launched and a ‘National Experts Forum on Auditing for Public Sector Companies’ will be established.
PAGE: What kind of efforts are required to recoup the losses made during the last 7 months in the wake of coronavirus?
Zia ul Mustafa: Well, these are trying times for all of us which calls for utmost efforts by every institution, whether in the sector of manufacturing, exports, services, or any profession, to not only make up the losses suffered due to lockdowns imposed to control the COVID-19 pandemic; but also to recoup the losses and sustain their institutions. ICMA Pakistan, being a professional accountancy body with a track record of over 70 years, took timely decisions during the lockdown period to continue with the core operations of education and CPD activities of members at a low profile. All campuses were closed and physical classes suspended to avoid the spread of the pandemic. The classes were transitioned to online learning through Zoom to continue the process of student learning. The Institute also offered a 25% discount on the coaching fee of the students to encourage them to join online classes. Subsequently, online exams were also conducted by the Institute successfully in July 2020, which was participated by students from Pakistan and abroad, and the results were announced in 10 working days, which is a milestone considering the lockdown scenario due to the pandemic.
For the members of the Institute, all the CPD programs and activities were ceased due to lockdown. Alternately, a quick transition was made to online CPD by arranging webinars and virtual programs to engage members during the lockdown. These webinars are quite successful with the maximum participation of members – both national and international. Another timely response of the Institute for its members was the launch of a ‘COVID-19 Resources Hub’ on Institute’s website. This website provides a centralized data of all COVID-19 related notifications issued by regulators and Government. One page on the Resources Hub is dedicated to the members of ICMA Pakistan where they can share articles and presentations on COVID-19 and its implications on the national economy and profession.
ICMA Pakistan also issued an e-publication titled ‘Economic Impact of COVID-19 on Pakistan’, which assesses the implications of the pandemic on different sectors of the economy. A Special Task Force was also formed comprising of senior officials of the Institute for an emergency response to members, students, and other stakeholders during the lockdown period. ICMA Pakistan Secretariat was allowed remotely from their homes to continue the daily routine tasks. A skeleton staff of the IT department was allowed to operate from the office to manage the online classes.
As far as a future line of action is concerned about Government’s announcement to open up the educational institutions in the country, ICMA Pakistan is closely monitoring the situation about any surge in the number of coronavirus cases in the country and may adopt a defensive approach by continuing with hybrid classes, which combines both the traditional face to face ‘seat time’ and the online learning through Zoom. When the situation would improve, the Institute may decide to go for physical classes at its full capacity all over its Campuses across Pakistan.
As far as macro-economy is concerned, I think that it would take years to recoup from the economic losses sustained by our country. The government needs to come forward in a big way to rescue our manufacturing and business sectors by providing as many incentives and reliefs as possible. Keeping in view high unemployment rate and poverty level, we need to continue the wheels of the economy.
The government may provide more aid to small businesses, particularly small-scale retailers, to protect the vulnerable segment of society. SMEs may be provided soft term loans with fewer interest rates to sustain in these difficult times. The government may, in particular, facilitate the start-ups to generate business activity and encourage new businesses. The government should also promote the digitalisation of Pakistani companies and businesses by channeling funds from international investors into the local venture capital space. Grants and loans may be provided to eligible enterprises for adoption or subscription of digitalization services to propel the business. Moreover, the government may consider providing tax incentives for companies relocating into Pakistan such as a 0% tax rate for 10 or 15 years for new investment in manufacturing sectors.
PAGE: How could the accountants help the government in these trying times?
Zia ul Mustafa: I think there are huge opportunities and challenges for the profession. The ‘changing global scenario’ and the ‘increasing complexity’ are both our biggest opportunities and challenges. Accountants are faced with a world that is rapidly changing after COVID-19. There are changes in technology, demographic and economic landscapes, ways of doing businesses, and above all the clients’ expectations. There are also emerging new business models that are shaping the buying behavior of the market, particularly as it relates to delivery, pricing, and customer service. All of this change is forcing accounting professionals to think about how to make the best of the emerging opportunities. As a professional, we must take this change as an ‘opportunity’ rather as a ‘challenge’.
Crisis Management has become a top priority in the wake of the widespread COVID-19 pandemic and its negative and pervasive impact on the businesses and economies. The professional accountants need to assess the impacts of COVID-19 on every aspect of the business and organization, especially in the context of business continuity, financial reporting, risks, and future planning, etc. and suggest remedial measures on how to meet the emerging realities.
Accountants also need to play a pivotal role in helping their organizations to navigate the COVID-19 crisis. The actions they take at this time, and the advice they give to management, can potentially make all the difference as to whether or not their organization emerges from this crisis intact. Resilience is paramount to ensure business continuity. Business targets and growth take a back seat to survival. CFOs and the finance function must step up to provide the necessary leadership and partnership to keep businesses afloat in the present crisis.
Finance function must look beyond finance and corporate reporting to assess the business from end- to-end and rethink their business strategies. The finance function needs to pivot from pure accounting and financial reporting to the big picture. CFOs and finance should lead the business in contingency planning and recalibrating business models for the COVID-19 economy. It is critical for finance to look at pricing associated with products and services and the supply chain when doing scenario planning, in addition to the financial aspects. CFOs also need to lead in the area of digitalization and talent management to sustain productivity during COVID-19, which is fundamental in business continuity. CFOs further need to cover the emergency spending on digital tools to enable remote working and productivity, while cutting back on expenditure that can be reduced, deferred, or canceled.